Your home; it’s the most valuable asset you’ll ever own. When it’s time to sell your house or condo, professionals assist with making it attractive to purchasers; negotiating the sales price, and settling the transaction. So, who can help you figure out if you owe taxes from selling your home?
Even if you have a tax professional to help, it’s a good idea to know some of the basics. Knowing the records you need to keep can help make the process a lot easier and stress-free.
What to Keep and How Long to Keep It
Your home is an asset. When most assets are sold, the amount you get minus the amount you paid originally tells you if you gained or lost money on the sale. But, selling your home is a lot more complicated; purchase and sales costs are involved. Also, the cost of home improvements can impact the gain on your home sale. To figure all that out, it is essential to keep the settlement sheets, receipts, contracts, and other records for your home purchase, sale, and improvement costs. In general, keep these records for three years after the due date for your tax return for the year in which you sold your home.
Will You Pay Taxes on the Gain on Your Home Sale?
Tax law allows eligible taxpayers a one-time exclusion of up to $250,000 ($500,000 for eligible married couples) of the gain from their home sale. This means that large numbers of taxpayers across the country will not pay tax on the gain from their home sale. Eligibility tests for the exclusion include how long you owned the home, how long it was your primary residence, and whether you used the exclusion in the past. This is a great way to preserve more of your home sale proceeds for other uses.
Where to Learn More
Even if you don’t plan to sell your home for a long time, you need to plan for it now. You can get more details about figuring out any gain on the sale of your home, and whether you qualify for the exclusion from IRS Publication 523, Selling Your Home. You can find it at http://www.irs.gov/pub/irs-pdf/p523.pdf. A qualified tax professional or financial advisor could also help you with the important details; that could mean tax savings for you.